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Nikkei gains, but thin volumes point to downside

Published 04/13/2011, 02:47 AM
Updated 04/13/2011, 02:52 AM
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* Tepco jumps, other utilties slide after liability report

* Automakers gain on hopes for sharp post-quake rebound in H2

* Oil shares extend losses on falling crude prices

* Nikkei might hit second bottom at 9,000 in late April - fund manager

* Hedge funds, short players behind today's gains - analyst

By Antoni Slodkowski and Ayai Tomisawa

TOKYO, April 13 (Reuters) - Tokyo shares nudged higher on Wednesday, recouping some of the previous day's losses, but the futures-led upward move on thin volume suggested the post-quake rebound has run out of steam and mid-term the market may be heading for a second bottom.

The most actively traded share since the quake, Tokyo Electric , surged on a report that its liabilities stemming from the nuclear crisis may be capped but other utilities slid as they may have to help foot the bill.

Strong gains in Honda , Nissan and other automakers after Nomura Securities said it expected a sharp post-quake recovery in the second-half of the business year helped offset declines in oil-related stocks on a sharp drop in crude prices.

The Nikkei has regained around two-thirds of the losses suffered after the March 11 earthquake, but trade has become more volatile and thinned out ahead of earnings reports that may pose more questions than give answers as many firms are poised not to give forecasts for the business year.

"The market is weak, and it may hit a second bottom at 9,000 or below around the beginning of the earnings season at the end of April as the real impact from the quake becomes clearer," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

He added that although carmakers' supply chains are damaged and their production has fallen to around 50 percent of capacity, the overall long-term picture is still positive, although earnings for April-June quarter will likely be extremely weak.

Japan's benchmark Nikkei average closed up 0.9 percent, or 85.92 points, at 9,641.18, while the broader Topix gained 0.73 percent to 844.59.

Global fund managers cut their exposure to Japanese equities sharply in early April, following the earthquake, tsunami and nuclear disaster, a Bank of America-Merrill Lynch poll showed on Tuesday. [ID:nLDE73B1HH]

But a few leading funds, including Threadneedle and IVA Funds, have increased their holdings.

BofA-Merrill's poll of 282 fund managers showed a net 18 percent now underweight, compared with a net 8 percent overweight a month ago.

COMPENSATION CATALYST

Shares of Tokyo Electric jumped 12 percent to 502 yen after the Yomiuri newspaper said Japan may cap the firm's liability to as little as $24 billion for damages stemming from its crippled nuclear plant. [ID:nL3E7FD01V]

A week ago the stock hit an all-time low of 292 yen. Some 172 million shares in the company changed hands on Wednesday, more than 8 percent of the 2.1 billion shares traded on the Tokyo Stock Exchange's first section, down from the 2.6 billion shares traded daily on average last week.

But Kansai Electric and other utilities slid as the newspaper said they may be asked to shoulder some of the compensation costs under the draft scheme.

Kansai fell 4.1 percent to 1,779 yen and Chubu Electric Power dropped 3.1 percent to 1,860 yen.

Among automakers, Honda Motor gained 3.3 percent to 2,957 yen, while Nissan rose 2.8 percent to 716 yen.

"Today's gains were likely spurred by hedge funds and short term players," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

"It's not a very serious move and long-only players are staying on the sidelines awaiting earnings announcements."

Renesas Electronics , a major supplier of chips to the auto industry, surged 7.6 percent to 698 yen after it said it was working to bring forward the reopening of a major quake-hit semiconductor plant from the previously scheduled target of July.

Shares of oil and gas developers Inpex Corp and Japan Petroleum Exploration Co (Japex) succumbed to profit-taking for a second straight day as oil prices extended their decline amid mounting concerns that rising fuel costs will erode demand and threaten the global economic recovery.

Inpex, Japan's biggest oil and gas developer, fell 1.6 percent to 610,000 yen. Japex lost 2 percent to 3,930 yen.

Bank of Japan data showed that the central bank had bought 18.4 billion yen in exchange-traded funds on Tuesday, boosting the mood. The BOJ has regularly supported the market on days of big falls. On Tuesday, the Nikkei dropped 1.7 percent. (Editing by Joseph Radford)

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